Wednesday, May 31, 2006

CIBC's Canadian banking operations might be losing market share, a key item for investors to watch when the bank reports its earnings tomorrow, an analyst said.

The rest of the big banks have already reported second-quarter results, and each one has shown market-share gains, UBS analyst Jason Bilodeau said in a note to clients. "We are concerned that the donor may be (CIBC)," Bilodeau wrote.

CIBC has been stung many times in the past year. Its biggest wound came from the $2.63 billion after-tax charge it took last August in relation to lawsuits stemming from its dealings with the now-defunct Enron Corp.

That forced the bank to report a $32 million loss for 2005, its first loss in more than a decade and a half. CIBC chopped its workforce, shedding 15 per cent of its executives and 900 others.

The bank's capital ratio took a hit. And CIBC has high provisions for credit losses from consumers and businesses, Mendonca said.

So, the bank has been trying to shed some of its riskier business, including credit cards and unsecured personal loans. Royal Bank of Canada and TD Bank Financial Group are swiping credit card business, an area CIBC is known to dominate, Mendonca said.

In the first quarter, CIBC had 18.3 per cent market share in credit cards outstanding, down from 18.9 per cent a year earlier. It held 28.6 per cent of credit card purchase volumes, down from 29.1 per cent a year earlier.

It's also known that "CIBC has been in net redemptions on the mutual fund side," Mendonca said. "The street's not going to be floored by seeing CIBC's market share going down."

However, the street will react if CIBC loses ground in residential mortgages, secured personal lending or consumer deposits, Mendonca said.

It had 14.7 per cent of the residential mortgage market and 19.3 per cent of consumer deposits in the first quarter.

After CIBC's Enron announcement last summer, its stock plunged as low as $68.56, but shares hit $81.23 in March — their highest to that point — after CIBC reported first-quarter earnings.

The profits, lower than the same period a year earlier, still beat expectations. The market was buoyed by CIBC's assurances the Enron issues were over.